(1.12.25, article by Scot Gauffeny and Keith Turner)

There have been numerous reports of landlords and contractors raising their prices to take advantage of the Palisades fire. This article provides a brief overview of California Penal Code Section 396, which is commonly referred to as the “anti-price gouging” statute.

What is price gouging?

Price gouging occurs when an individual or business unfairly increases the price of essential goods or services, especially during emergencies or disasters.

For example, during a natural disaster, a landlord might drastically raise rents in response to a large number of people losing their homes. This practice is not only exploitative, it is illegal in California.

The Law

California’s price gouging law, Penal Code Section 396, was enacted in 1994 following the Northridge earthquake.   The statute was in response to local price surges in commodities like eggs, batteries, and plywood in the aftermath of the disaster.  The statute is to punish would-be price gougers by providing both criminal and civil remedies.

California Penal Code Section 396 makes it “unlawful for a person, contractor, business, or other entity to sell or offer to sell,” within 30 days of the Government declaring a state of emergency, certain goods or services for a price more than 10% greater (with certain exceptions) than what that they charged for the same goods or services before the state of emergency was declared. This period is extended to 180 days for construction and repair work.

This law applies anywhere in the state where consumer demand has increased following a declared state of emergency. So, if fires in Los Angeles County evacuate to Orange County, landlords and hotels in Orange County cannot increase prices to take advantage of the increased demand.

What sort of goods and services are protected?

The statute covers a wide variety of essentials, including:

  • Emergency and medical supplies;
  • Consumer food items;
  • Housing;
  • Building materials;
  • Fuel;
  • Transportation;
  • Storage.

Rental Housing: Landlords cannot evict a residential tenant for at least 30 days (or longer, if the emergency period is extended) after the state of emergency is declared. They also cannot offer to rent the unit at a price greater than the evicted tenant could be charged. But, this does not apply if the eviction process started before the emergency was declared.

Hotels/Motels: An owner or operator of a hotel or motel cannot increase the hotel or motel’s regular rates by more than 10 percent above what it advertised before the state of emergency was declared. But, a greater price increase is not unlawful if the increase in price is directly attributable to additional costs for goods or labor used in its business, to seasonal adjustments in rates that are regularly scheduled, or to previously contracted rates.

Construction Work: Within 180 days of the state of emergency being declared, contractors cannot sell or offer to sell any repair or construction services, or offer emergency cleanup services, for more than 10% above the price they charged immediately beforehand. The contractor may operate with a price increase of more than 10% if they can prove the increase was caused by additional costs for labor, materials, and supplies; however, they still must still operate within other statutory limitations.

What are the consequences of price gouging?

It is a crime:  Violators of the price gouging statute can be imprisoned for up to one year, and can expect a fine of up to $10,000. To report overcharges, call County of Los Angeles Department of Consumer and Business Affairs at 800-593-8222

Civil liability:   The statute also provides for direct civil actions.   Plaintiffs can seek restitution and injunctive relief. 

Conclusion

Nobody should benefit from the misfortune of others. If you believe that you have been taken advantage of in the wake of a disaster, contact our firm for a consultation.